In a recent webinar co-presented by IACCM and Determine (available on demand here), IACCM CEO Tim Cummins discussed the history of global contract lifecycle management (CLM) efforts reaching back to the 1990s. As he pointed out, the CLM approaches of the time had a tendency to overemphasize centralization and standardization for the sake of cost efficiency. Though this strategy did bring some short-term operational wins, it both alienated local users and created regulatory and/or accounting complications for the company and their suppliers.
While it would be easy to pass judgement on this first-pass approach, it made sense given the procurement priorities and tools of the time. In fact, standardization aligned perfectly with procurement’s modus operandi, which was almost entirely volume-leveraged and savings-driven. It also employed the full capabilities of the contract management technology available then, which mostly amounted to repositories — e-filing cabinets — capable of no more than centralized electronic document storage.
Don’t file contracts, leverage them.
In the two decades since, many things have changed. Our objectives extend far beyond savings, and the available technology has improved by leaps and bounds. Procurement now has the flexibility and dimensionality required to manage contracts, spend, and relationships in a way that enables a value-oriented, dynamic way of conducting business. It has evolved from having a global strategy to a multinational perspective.
What, though, exactly is the difference between global and multinational? While “global” takes one set of terms or requirements and attempts to get everyone in line behind them, “multinational” preserves a single version of the truth across all borders, at the same time acknowledging local demands such as visibility constraints and regulatory requirements. Taking a multinational approach balances the need to centralize and standardize with the advantages of facilitating the right level of localized flexibility and compliance. Multinational establishes controls without taking control.
Center-led contract management, local empowerment.
Part of what has made this transition possible is procurement’s shift away from mandate-driven programs to those that emphasize collaboration and relationship building both inside and outside of the organization. CLM solutions exist to empower good decision making, rather than unnecessarily constraining colleagues in another part of the company or the world. As such, these solutions are center-led rather than centralized, making use of local preferences and establishing governance without resorting to rigid frameworks. Creativity and variability may have been the enemies of global, old-style procurement, but today they are every bit as important to procurement as resource efficiency.
Another key factor in the shift from global to multinational is an increase in two-way information flows. eFiling cabinets weren’t capable of much more than static storage, but we have put those behind us. Today we negotiate, redline, and sign online. CLM has the ability to keep contracts alive throughout their entire active term, and we are also able to have our contracts live alongside the other information that makes them valuable. By combining spend data, supplier performance information, eProcurement, and reporting, you’re able to access insights through visibility you otherwise wouldn’t have.
CLM transforms contracts into collaborative business tools.
Contracts are no longer static documents being “pushed outward” from the corporate headquarters or a central team. Instead, they are the meeting point for bidirectional exchanges of information that contribute to the creation of competitive advantage while remaining compliant with multiple local laws and customs. This new level of sophistication may create some additional technical requirements, but the return – in both performance and relationships — more than compensates for the investment.
Since the 1990s, procurement has gone from seeing local variability as something to be eliminated for the sake of standardization to realizing that diversity is the very thing we need to create value. And yet, despite these holistic good intentions, the complexity of the international business climate has increased in terms of taxes, jurisdictional issues, and localized regulations. Decisions may be made centrally, but if companies do so without considering the legal and cultural implications of disenfranchising local staff and agencies, their results will soon fall short and seem “oh so twenty years ago”.
Learn all the ways Contract Management and CLM can power your business multinationally and explore our related blogs and resources. Ready to take the next step and take control of your contracts? Schedule a demonstration.